The Forex quick guide for beginners and private traders

This guide was created by Easy-Forex Trading Platform, and is offered FREE to all Forex traders.

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In this book: (click a chapter title below to directly get there)

page

Intro How to use this book 3

1. Forex? What is it, anyway? (a simple introduction, for the very beginners)

4

2. What is Forex trading? What is a Forex deal? 6

3. What is the global Forex market? 12

4. Overview of trading Forex online 21

5. Training for success 25

6. Technical Analysis: patterns and forecast methods used today

29

7. Fundamental Analysis and leading market indicators 47

8. Day-Trading (on the Easy-Forex Trading Platform) 56

9. Twenty issues you must consider 61

10. Tips for every Forex trader 67

11. Forex glossary 74

12. Disclaimer (risk warning) 110

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Introduction: how to use this book

This book has been developed to help the Forex beginner, though experienced and professional traders may find it a handy reference.

Beginners and novice traders are likely to benefit from reading the entire text, starting with Chapter 1, which provides a basic overview of what currency trading is, and how to get started.

The chapters are set out in a logical flow, but do not need to be read in order to make sense, as each works as a discrete unit unto itself. You may prefer to focus first on those chapters that you feel will complement your particular knowledge base best. Chapter 11 is a glossary of terms (listed alphabetically) used in the Forex business, that will prove helpful as you read this book, and may serve as a valuable reference as you become an experienced currency trader.

With the help of this guide, you will soon be ready to start trading Forex in fact, with the assistance of the online Easy-Forex team, you can start today. We wish you success in your trading, and hope you find this book interesting, helpful and enjoyable.

Before you start, please remember:

Forex trading (OTC Trading) involves substantial risk of loss, and may not be suitable for everyone. Before deciding to undertake such transactions, a user should carefully evaluate whether his/her financial situation is appropriate for such transactions. Read more in the "RISK WARNING" section on Easy-Forex site / Risk Disclaimer.

Always ask your Forex dealer (the TRADING PLATFORM you wish to trade with) the questions we prepared for you in this book (chapter 9). Selecting the appropriate Forex TRADING PLATFORM is essential for success in handling your trading and monitoring your activity, as well as maximizing profits, while minimizing losses and costs.

Your comments and suggestions are highly appreciated (and may well be incorporated in our next edition)! Be our guest and write us:

ForexBooks@Forex.info

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[1] Forex? What is it, anyway? The market The currency trading (foreign exchange, Forex, FX) market is the biggest and fastest growing market on earth. Its daily turnover is more than 2.5 trillion dollars. The participants in this market are central and commercial banks, corporations, institutional investors, hedge funds, and private individuals like you. What happens in the market? Markets are places where goods are traded, and the same goes with Forex. In Forex markets, the goods are the currencies of various countries (as well as gold and silver). For example, you might buy euro with US dollars, or you might sell Japanese Yen for Canadian dollars. Its as basic as trading one currency for another. Of course, you dont have to purchase or sell actual, physical currency: you trade and work with your own base currency, and deal with any currency pair you wish to. Leverage is the Forex advantage The ratio of investment to actual value is called leverage. Using a $1,000 to buy a Forex contract with a $100,000 value is leveraging at a 1:100 ratio. The $1,000 is all you invest and all you risk, but the gains you can make may be many times greater. How does one profit in the Forex market? Obviously, buy low and sell high! The profit potential comes from the fluctuations (changes) in the currency exchange market. Unlike the stock market, where share are purchased, Forex trading does not require physical purchase of the currencies, but rather involves contracts for amount and exchange rate of currency pairs. The advantageous thing about the Forex market is that regular daily fluctuations in the regular currency exchange markets, often around 1% - are multiplied by 100! (Easy-Forex generally offers trading ratios from 1:50 to 1:200). How risky is Forex trading? You cannot lose more than your initial investment (also called your margin). The profit you may make is unlimited, but you can never lose more than the margin. You are strongly advised to never risk more than you can afford to lose.

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How do I start trading? If you wish to trade using the Easy-Forex Trading Platform, or any other, you must first register and then deposit the amount you wish to have in your margin account to invest. Registering is easy with Easy-Forex and it accepts payment via most major credit cards, PayPal, Western Union. Once your deposit has been received, you are ready to start trading. How do I monitor my Forex trading? Online, anywhere, anytime. You have full control to monitor your trading status, check scenarios, change some terms in your Forex deals, close deals, or withdraw profits.

Easy-Forex wishes you enjoyable and successful Forex trading!

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[2] What is Forex trading? What is a Forex deal? The investor's goal in Forex trading is to profit from foreign currency movements.

More than 95% of all Forex trading performed today is for speculative purposes (e.g. to profit from currency movements). The rest belongs to hedging (managing business exposures to various currencies) and other activities.

Forex trades (trading onboard internet platforms) are non-delivery trades: currencies are not physically traded, but rather there are currency contracts which are agreed upon and performed. Both parties to such contracts (the trader and the trading platform) undertake to fulfill their obligations: one side undertakes to sell the amount specified, and the other undertakes to buy it. As mentioned, over 95% of the market activity is for speculative purposes, so there is no intention on either side to actually perform the contract (the physical delivery of the currencies). Thus, the contract ends by offsetting it against an opposite position, resulting in the profit and loss of the parties involved.

Components of a Forex deal

A Forex deal is a contract agreed upon between the trader and the market-maker (i.e. the Trading Platform). The contract is comprised of the following components:

The currency pairs (which currency to buy; which currency to sell)

The principal amount (or "face", or "nominal": the amount of currency involved in the deal)

The rate (the agreed exchange rate between the two currencies).

Time frame is also a factor in some deals, but this chapter focuses on Day-Trading (similar to Spot or Current Time trading), in which deals have a lifespan of no more than a single full day. Thus, time frame does not play into the equation. Note, however, that deals can be renewed (rolled-over) to the next day for a limited period of time.

The Forex deal, in this context, is therefore an obligation to buy and sell a specified amount of a particular pair of currencies at a pre-determined exchange rate.

Forex trading is always done in currency pairs. For example, imagine that the exchange rate of EUR/USD (euros to US dollars) on a certain day is 1.1999 (this number is also referred to as a spot rate, or just rate, for short). If

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an investor had bought 1,000 euros on that date, he would have paid 1,199.00 US dollars. If one year later, the Forex rate was 1.2222, the value of the euro has increased in relation to the US dollar. The investor could now sell the 1,000 euros in order to receive 1222.00 US dollars. The investor would then have USD 23.00 more than when he started a year earlier.

However, to know if the investor made a good investment, one needs to compare this investment option to alternative investments. At the very minimum, the return on investment (ROI) should be compared to the return on a risk-free investment. Long-term US government bonds are considered to be a risk-free investment since there is virtually no chance of default - i.e. the US government is not likely to go bankrupt, or be unable or unwilling to pay its debts.

Trade only when you expect the currency you are buying to increase in value relative to the cur